U.S. Third Circuit Refuses to Enforce Approved Class Settlement against the State of Louisiana as an Indirect Purchaser

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In the underlying lawsuit, private indirect purchasers moved for final approval of a class settlement, after the District Court had already certified the class. The State of Louisiana, an indirect Flonase purchaser, qualified as a potential class member but did not receive the approved Class Notice. Instead, it only received CAFA Notice.  In the second ancillary suit, the settling defendant, Glaxo-Smith Kline filed a motion to enforce the settlement agreement and to thereby enjoin the Louisiana Attorney General.  The U.S. Third Circuit Court of Appeal affirmed the denial of the motion, and dismissal of the second lawsuit, under the Eleventh Amendment.

“This case turns on whether the District Court exercised jurisdiction over Louisiana in the primary suit. A private party may bring a suit against a state official to enforce a settlement agreement despite the Eleventh Amendment. To enforce a settlement agreement, a private party must draw upon a federal court’s ancillary jurisdiction. Ancillary jurisdiction may extend to claims having a factual and logical dependence on the primary lawsuit, but that primary lawsuit must contain an independent basis for federal jurisdiction. As a result, GSK may not draw upon the District Court’s powers of ancillary jurisdiction unless the District Court properly exercised jurisdiction over the State in approving the settlement agreement. In approving the settlement agreement, the District Court lacked jurisdiction over the State because the Eleventh Amendment applies to the primary case and because Louisiana did not waive its sovereign immunity in that case….

“The State of Louisiana did not waive its sovereign immunity by receiving a CAFA notice and by failing to oppose the settlement based on that notice….

“GSK asserts, without citation, that it does not follow that sovereign immunity must afford States more protection against becoming absent class members than what ordinary litigants receive under Rule 23. It reasons that States should not receive more protection because States are far more sophisticated than ordinary litigants, and understand the significance of litigation conduct far better. This argument misses the point. The Constitution requires more protections for States than for ordinary litigants not because of their sophistication but because of their status as sovereigns.”

 

In re: Flonase Antitrust Litigation, No.16-1124, 2017 WL 6544107 (3rd Cir. Dec. 22, 2017).

 

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